Answer:
The answer is (a) Y = 520, (b) Y = 2,720, (c) (I) Y = 560, (II) Y = 560, (d) (I) Y = 560, (II) M = 3, (e) (I) Y = 560, (II) Government Multiplier = 40billion, (III) Y = 700
(a)
Explanation:
(a)
Given that
Y = I + G + ca + 0.75 ( Y - T)
Where ca = autonomous consumption, Y - T = disposable income
Substitute into the equation
Y = 60 + 50 + 80 + 0.75 ( Y - 60)
Rearrange the equation
Y - 0.75Y = 60 + 50 + 80 - 60
Factor out the variable Y
(1 - 0.75) Y = 190 - 60
Simplify
0.25Y = 130
Divide both sides by 0.25
0.25Y/0.25 = 130/0.25
Y = 520
(b)
Y = C + I + G
Since the value of output depends on the household's intention to consume
Substitute into the equation
Y = 80 + 0.75 + 600
Rearrange the equation
Y - 0.75Y = 80 + 600
Factor out the variable Y
(1-0.75)Y = 680
Simplify
0.25Y = 680
Divide both sides by 0.25
0.25Y /0.25 = 680/0.25
Y = 2,720
(c)I
Y = C + I
Y = 80 + 60
Rearrange the equation
Y - 0.75Y = 80 + 60
Factor out the variable Y
(1-0.75)Y = 80 + 60
Simplify
0.25Y = 140
Divide both sides by 0.25
0.25Y /0.25 = 140/0.25
Y = 560
(II)
Equilibrium condition S = I
C = 80 + 0.75Y =60
Rearrange the equation
Y - 0.75Y = 80 + 60
Factor out the variable Y
(1-0.75)Y = 80 + 60
Simplify
0.25Y = 140
Divide both sides by 0.25
0.25Y /0.25 = 140/0.25
Y = 560
(d)(I)
Y = I + G + ca + 0.75 (Y -T )
Where ca = autonomous consumption, Y - T = disposable income
Substitute into the equation
Y = 60 + 50 + 80 + 0.75 (Y -50)
Rearrange the equation
Y - 0.75Y = 60 + 50 + 80 - 50
Factor out the variable Y
(1-0.75)Y = 190 - 50
Simplify
0.25Y = 140
Divide both sides by 0.25
0.25Y /0.25 = 140/0.25
Y = 560
(II)
Tax Multiplier = -MPC/(1-MPC)
Because there is a decrease in tax,then the multiplier will be positive, because there is now more money in the circular flow
M= MPC /(1-MPC )
M = 0.75/(1-0.75)
0.75/0.25
= 3
The tax multiplier is 3
(e)(I)
Y = I + G + ca + 0.75 (Y -T)
Substitute into the equation
Y = 60 + 60 + 80 + 0.75 (Y -60)
Rearrange the equation
Y-0.75Y = 60 + 60 + 80 - 60
Factor out the variable Y
(1-0.75)Y = 200 - 60
Simplify
0.25Y =140
Divide both sides by 0.25
0.25Y /0.25 = 140/0.25
Y = 560
(II)
K = ▲Y/▲G
K= 1/1-MPC
K = 1/1-0.75
K = 1/0.25
K = 4
K = ▲Y/▲G
▲G = (60-50) =10
4 = ▲Y/10
Cross multiply
▲Y = 4 × 10
▲Y = 40 billion
(e)(III)
How would the answer change, if consumption function were
C (Y -T )=80billion + 0.80 (Y -T )
Y = I + G + ca + 0.75 (Y -T )
Substitute into the equation
Y = 60 + 50 + 80 + 0.80 (Y -50)
Rearrange the equation
Y - 0.80Y = 60 + 50 + 80 - 50
Factor out the variable Y
(1-0.80)Y = 190 - 50
0.2Y = 140
Divide both sides by 0.2
0.2Y /0.2 = 140/0.2
Y = 700
Prepare the journal entries for the issuance of the bonds in both 1 and 2. Assume that both bonds are issued for cash on January 1, 2013.
1. Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2. The straight-line method is used to allocate interest expense.
2. Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 1/4 . The effective interest method is used to allocate interest expense.
Answer:
Explanation:
The journal entries are shown below:
1. Cash A/c Dr $218,750 ($250,000 × 0.875)
Discount on bonds payable A/c $31,250
To Bonds payable A/c 250,000
(Being bond is issued at a discount is recorded)
2. Cash A/c Dr $281,400 ($240,000 × 1.1725)
To Premium on bonds payable A/c $41,400
To Bonds payable A/c 240,000
(Being bond is issued at a discount is recorded)
Acme Manufacturing is producing $4,060,000 worth of goods this year and expects to sell its entire production. It also is planning to purchase $1,500,000 in new equipment during the year. At the beginning of the year, the company has $500,000 in inventory in its warehouse.
1. Find actual investment and planned investment if:
(a) Acme actually sells $3,850,000 worth of goods.
(b) Acme actually sells $4,000,000 worth of goods.
(c) Acme actually sells $4,200,000 worth of goods
Answer:
actual investment = $1560000
actual investment = $1710000
actual investment = $1360000
and
planned investment = $1500000
Explanation:
given data
producing goods = $4,060,000
new equipment = $1,500,000
inventory in warehouse = $500,000
to find out
actual investment and planned investment
solution
first if sell at = $3850000
unplanned investment is = producing goods - sell
unplanned investment = $4,060,000 - $3850000
unplanned investment = $60000
so
actual investment = planned investment + unplanned investment
actual investment = $1,500,000 + $60,000
actual investment = $1560000
and
next if actually sells is = $4,000,000
unplanned investment = $4,060,000 - $4,000,000
unplanned investment = $210,000
so
actual investment = planned investment + unplanned investment
actual investment = $1,500,000 + $210,000
actual investment = $1710000
and
next if actually sells is = $4,200,000
unplanned investment = $4,060,000 - $4,200,000
unplanned investment = $140,000
so
actual investment = planned investment + unplanned investment
actual investment = $1,500,000 + $140,000
actual investment = $1360000
To find the actual and planned investment, subtract the actual sales from the production value. If actual sales are less than expected, there is an actual investment. If actual sales are more than expected, there is a negative actual investment.
Explanation:To calculate the actual investment and planned investment, we need to consider the difference between the actual sales and the expected sales. The formula for investment is: Planned investment = Production value - Expected sales, Actual investment = Production value - Actual sales.
(a) Acme actually sells $3,850,000 worth of goods:
Planned investment = $4,060,000 - $4,060,000 = $0Actual investment = $4,060,000 - $3,850,000 = $210,000(b) Acme actually sells $4,000,000 worth of goods:
Planned investment = $4,060,000 - $4,060,000 = $0Actual investment = $4,060,000 - $4,000,000 = $60,000(c) Acme actually sells $4,200,000 worth of goods:
Planned investment = $4,060,000 - $4,060,000 = $0Actual investment = $4,060,000 - $4,200,000 = -$140,000Learn more about calculation of investment here:https://brainly.com/question/29441992
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The definition of internal control developed by the Committee of Sponsoring Organizations (COSO) includes controls related to the reliability of financial reporting, the effectiveness and efficiency of operations, and:A. Compliance with applicable laws and regulations.B. Effectiveness of prevention of fraudulent occurrences.C. Safeguarding of entity equity.D. Incorporation of ethical business practice standards.
Answer:
A. Compliance with applicable laws and regulations.
Explanation:
The definition of internal control developed by the Committee of Sponsoring Organizations (COSO) includes controls related to the reliability of internal and external reporting, the effectiveness and efficiency of operations, and Compliance with applicable laws and regulations.
The internal control definition by COSO includes controls related to financial reporting, operations efficiency, and compliance with laws and regulations. These are underscored by regulations from key institutions and the enactment of the Sarbanes-Oxley Act, highlighting the importance of ethical and compliant financial practices.
The definition of internal control, as developed by the Committee of Sponsoring Organizations (COSO), includes controls related to the reliability of financial reporting, the effectiveness and efficiency of operations, and compliance with applicable laws and regulations. This strategic framework ensures that businesses adhere to standards that protect stakeholders and maintain the integrity of financial transactions and reporting. Institutions such as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, and the Financial Accounting Standards Board set regulations for transaction reporting, demonstrating the importance of these controls. Following major accounting scandals like Enron and WorldCom, the Sarbanes-Oxley Act of 2002 was enacted to increase confidence in financial reporting and mitigate the risk of accounting fraud, underscoring the emphasis on compliance and ethical financial practices.
Abe Lincoln was scheduled to give a speech that was rumored to be better than his Gettysburg Address. Many citizens were planning on attending this occasion. The local bed and breakfast was renting out rooms at three times the normal rate during the time that Lincoln would be in town for his speech. Paul and Patti Smith rented a room for that amount because they were so excited to hear Lincoln speak. A day before Lincoln's speech, he was assassinated while enjoying the theatre. The bed and breakfast sought payment for the room rental, but the Smiths refused. The bed and breakfast sued for the Smiths for breach of contract. This is an example of
a. discharge by illegaility
b. discharge by destruction of subject matter
c. discharge by commercial impractibility
d. discharge by death
e. discharge by frustration of purpose
Answer:discharge by frustration of purpose
Explanation:
Discharge by frustration of purpose is a defense concept used in law in order to bring about a breach or termination of a contract.This occurs when unplanned,spontaneous or unforeseen circumstances occurs and thus,it prohibits or prevents the core reason in which the contract was being entered into at the time of the contracts agreement,with both parties fully aware of the core reason which brought about the establishment of the contract.That is to say,the primary objective in which the contract was being created upon has automatically brought about a halt of the secondary reason(which is the contract itself),having in mind that both parties were originally aware of the primary reason for entering the contract.
Here,Paul and Patti Smith rented a room an amount triple it's original price because they were so excited to hear Lincoln speak. A day before Lincoln's speech, he was assassinated.So this disappointment brought about a "discharge by frustration of purpose" by the Smiths,not forgetting that that The bed and breakfast knew it was their original intent,that's why they paid such exorbitant prices for the room rental,although it sued them.
Malkind Hardware is adding a new product line that will require an investment of $ 1 comma 418 comma 000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $ 320 comma 000 the first year, $ 280 comma 000 the second year, and $ 240 comma 000 each year thereafter for eight years. Compute the payback period. Round to one decimal place.
Answer:
5.4 years
Explanation:
In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:
In year 0 = $1,418,000
In year 1 = $320,000
In year 2 = $280,000
In year 3 = $240,000
In year 4 = $240,000
In year 5 = $240,000
In year 6 = $240,000
In year 7 = $240,000
In year 8 = $240,000
In year 9 = $240,000
In year 10 = $240,000
If we sum the first 5 year cash inflows than it would be $1,320,000
Now we deduct the $1,320,000 from the $1,418,000 , so the amount would be $98,000 as if we added the six year cash inflow so the total amount exceed to the initial investment. So, we deduct it
And, the next year cash inflow is $240,000
So, the payback period equal to
= 5 years + $98,000 ÷ $240,000
= 5.4 years
In 5.4 yeas, the invested amount is recovered.
Jordan Company is considering the purchase of a machine with the following data:
Initial cost $150,000
One-time training cost 12,000
Annual maintenance costs 15,000
Annual cost savings 75,000
Salvage value 20,000
The cash payback period is
A) 2.70 years.
B) 2.50 years.
C) 2.37 years.
D) 2.17 years
Answer:
Option (A) is correct.
Explanation:
Given that,
Initial cost = $150,000
One-time training cost = 12,000
Annual maintenance costs = 15,000
Annual cost savings = 75,000
Salvage value = 20,000
Cash payback period = Initial Investment ÷ Net annual cash inflows
= [($150,000 + $12,000) ÷ ($75,000 - $15,000)]
= $162,000 ÷ $60,000
= 2.7 years
Final answer:
The cash payback period for the machine is A) 2.7 years.
Explanation:
The cash payback period is the amount of time it takes for the cash inflows from an investment to equal the initial cash outflow. To calculate the cash payback period, we need to determine when the cumulative cash inflows will equal or exceed the initial investment. In this case, the initial cost is $150,000 and the annual cost savings are $75,000. We can divide the initial cost by the annual cost savings to find the cash payback period:
Cash payback period = Initial Investment ÷ Net annual cash inflows
= [($150,000 + $12,000) ÷ ($75,000 - $15,000)]
= $162,000 ÷ $60,000
= 2.7 years
Therefore, the cash payback period for the machine is 2.7 years.
The contents of a sample of 26 cans of apple juice showed a standard deviation of .06 ounces. We are interested in testing whether the variance of the population is significantly more than .003. The test statistic is a. 500. b. 31.2. c. 1.2. d. 30.
Answer:
Please see attachment
Explanation:
Please see attachment
Miller Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 11.4 percent and its cost of debt is 6.1 percent. If the tax rate is 24 percent, what is the company’s WACC?
Answer:6.89%
Explanation:
If it's target debt to equity ratio is 0.45, the percentage of debt in its capital structure = D /D + E = 0.45 / (1 +0.45) = 0.31 = 31%
The percentage of equity in the capital structure = 100 - 31% = 69%
The Weighted Average Cost of Capital = [Weight of debt × cost of debt × (1 - tax rate)] [weight of equity × cost of equity]
=( 0.31 × 11.4% × 0.76) + (6.1% × 0.69)
= 2.69 + 4.21 = 6.89%
Answer:
Explanation:
In the solution provided by ewomazinoade, Cost of debt (6.1%) and cost of equity (11.4%) has been mistakenly swapped.
So, the correct answer would be 9.3%
Dividends are:Multiple Choicepayable at the discretion of a firm's president.treated as a tax-deductible expense of the issuing firm.paid out of aftertax profits..paid only to preferred stockholders.only partially taxable to high-income individual shareholders.
Answer:
The correct answer is letter "C": paid out of aftertax profits.
Explanation:
A dividend is a cash distribution by a company to its shareholders. It is a payment made as a bonus to investors from publicly listed firms or funds for putting their money into the project. They can be paid either in cash or in stocks or sometimes in other forms of property only when the aftertax earnings have been calculated.
The price elasticity of supply is affected by
A. whether the good produced has close substitutes available.
B. the passage of time.
C. whether the good produced is a luxury or a necessity.
D. the definition of the market.
E. the share of the good in consumer budgets.
Answer:
B. the passage of time.
Explanation:
Price elasticity of supply measures how sensitive quantity supplied are to changes in price.
Price elasticity of supply is determined by the passage of time.
Typically, in the short run, the elasticity of supply is usually inelastic. Prices do not usually impact quantity supplied because in the short run, some of the factors of production are fixed. But in the long run, the price elasticity of supply are more elastic.
The other factors listed above in the options affect the price elasticity of demand.
In today's global market, U.S. companies using traditional mass manufacturing methods are:A. More efficient and highly competitiveB. No longer competitiveC. As competitive as other methods of productionD. Rebounding and becoming more competitive again
Answer:
Letter B is correct. No longer competitive.
Explanation:
The post-Fordist model of the 1970s made labor relations more flexible and had a major impact on the most widely used administrative model in the highly competitive globalized world.
Pos Fordism is marked by the concept of '' just in time '' which proposes lean production that meets consumer demands and needs through personalization, brand value creation and cost overstocking and stock analysis. variant market trends in a globalized market.
Food Shoppe Galore had the following information: Total market value of a company’s stock: $650 million Total market value of the company’s debt: $150 million What is the weighted average of the company’s debt? Multiple Choice 18.75% 40.75% 55.75% 81.25% 90.50%
Answer:
18.75%
Explanation:
Market value of stock = 650,000,000
Market value of debt = 150,000,000
Total market value of capital = Market value of stock + Market value of debt
Total market value of capital = 650,000,000 + 150,000,000 = 800,000,000
Calculate the proportion of debt;
= 150,000,000/ 800,000,000
= 0.1875
Convert the 0.1875 to a percentage; 0.1875 *100 = 18.75%
Therefore, the weight average of the company's debt is 18.75%
Kramer Industries has cash of $ 42 comma 000; net Accounts Receivable of $ 47 comma 000; shortminusterm investments of $ 13 comma 000 and inventory of $ 30 comma 000. It also has $ 30 comma 000 in current liabilities and $ 52 comma 000 in longminusterm liabilities. What is the current ratio for Kramer Industries?
Answer:
4.4
Explanation:
Given the following data from Kramer Industries -
Current assets;
Cash = $42,000
Account receivables = $47,000
short term investments = $13,000
Inventory = $30,000
Current assets = 42000 + 47000 + 13000 +30000
= $132,000
Current liabilities = $30,000
Current ratio = current assets/current liabilities
= 132000/30000
= 4.4
The current ratio of Kramer Industries = 4.4
Shelton Co. purchased a parcel of land six years ago for $877,500. At that time, the firm invested $149,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $56,000 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $929,000. What value should be included in the initial cost of the warehouse project for the use of this land?
Answer:
The company should recognise $929,000 as the cost the land as this the fair value as at the date when management considers to build the warehouse.
Explanation:
Cost at date of purchase of land
The inital cost of the land is $1,026,500 (cost + grading cost); and since it was leased out, it will be accounted for in line with IAS 40 (Investment Property) to earn investment income (i.e. lease income).
Measurement of Investment property
An investment property can be measured at cost or fair value. The question didn't say that the land was depreciated, hence its assumed that it was measured at fair vale.
Measurement at date of commencement of constructing the warehouse
IAS 40 permits transferring investment property (e.g the land) to owner occupied property (i.e. the warehouse). Hence in determining the value of the land at this date we have measure the value in line with IFRS 13 (Fair Value Measurement).
Since we know the current market value of the asset at this date as $929,000. This would be recognised as the cost of the land.
Project W requires a net investment of $1,000,000 and has a payback period of 5.6 years. You analyze Project W and decide that Year 1 free cash flow is $100,000 too low, and Year 3 free cash flow is $100,000 too high. After making the necessary adjustments,
(A) the NPV of Project W will decrease,
(B) the payback period for project W will be longer than 5.6 years.
(C) the IRR of Project W will increase
(D) the payback period for Project W will be shorter than 5.6 years
Answer:
Option C is correct.
Explanation:
The paycheck of a period is the time within which the initial investment is recovered.
It does not consider the time value of money, which means all cash flows have equal weightage.
The paycheck period is 5.6 years and it will not be affect by the change in the cash flow in the year 1 and 3.
The IRR (Internal return rate) and NPV ( Net present Value) of the project will get affected as these methods give more weightage to current flows than later.
Thus, increasing of year-1 cash flow decreasing of year-3 cash flow will increase the IRR and NPV of project.
Therefore, the correct answer is option C ( The IRR of the C will increase.)
Final answer:
Adjusting the cash flows of Project W by decreasing Year 1 by $100,000 and increasing Year 3 by the same amount results in a decreased NPV and a longer payback period, while the change in IRR cannot be determined without more information.
Explanation:
When adjusting the free cash flow for Project W, changing Year 1's inflow to be $100,000 lower and Year 3's to be $100,000 higher impacts the Net Present Value (NPV), Internal Rate of Return (IRR), and payback period. Since the NPV calculation discounts future cash flows to their present values, a reduction in earlier cash flows (Year 1) has a greater negative effect on the NPV than the same amount added to later cash flows (Year 3). Therefore, the NPV of Project W will decrease (A). The payback period measures how long it takes to recover the initial investment. Since Year 1's inflow decreases, it will take longer to recoup the investment, thus the payback period for Project W will be longer than 5.6 years (B). The IRR is the discount rate at which the NPV of all cash flows is zero. Adjusting cash flows could change the IRR, but without specifics on the overall cash flow pattern, it cannot be determined whether the IRR will increase (C) or not. So the statement that the payback period for Project W will be shorter than 5.6 years (D) is incorrect.
A manufacturing company has a beginning finished goods inventory of $28,800, cost of goods manufactured of $59,000, and an ending finished goods inventory of $28,100. The cost of goods sold for this company is
Answer:
The cost of goods sold for this company is $59,700
Explanation:
Cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory
In the company:
Beginning finished goods inventory: $28,800
Cost of goods manufactured: $59,000
Ending finished goods inventory: $28,100
Therefore,
Cost of goods sold = $28,800 + $59,000 - $28,100 = $59,700
A no-load mutual fund starts the year with $309 million in net assets and 22 million shares outstanding. It ends the year with $337 million in net assets, and 29 million shares outstanding. The fund made dividend distributions of $1.6 per share and capital gains distributions of $1.2 per share during the year. What was the rate of return on the fund for the year?
Answer:
2.63%
Explanation:
Net assets at beginning is $309 million & shares outstanding is 22 million, then net asset per share is $14.05
Net assets at year end is $337 million & shares outstanding is 29 million, then net asset per share is $11.62
⇒Net asset per share reduced $2.43
The total gain/ loss per share in year included Net asset per share reduced $2.43 + dividend distributions of $1.6 per share + gains distributions of $1.2 per share
= -2.43+1.6+1.2 = $0.37
the rate of return on the fund for the year is 2.63% = 0.37/14.05
Economic exposure refers to a. the sensitivity of realized domestic currency values of the firm's contractual cash flows denominated in foreign currencies to unexpected exchange rate changes.b. the extent to which the value of the firm would be affected by unanticipated changes in exchange rate.c. the potential that the firm's consolidated financial statement can be affected by changes in exchange rates.ex post and ex ante currency exposures.
Answer:
All are correct
Explanation:
Economic exposure is a type of foreign exchange exposure caused by the effect of unexpected currency fluctuations on a company’s future cash flows, foreign investments, and earnings.
All three statements for Economic exposure in the text are related to exchange rate changes, in which (a) is about cash flow, (b) is value of the firm, and (c) is financial statement.
Economic exposure refers to the potential impact of unanticipated changes in exchange rates on a company's overall financial position.
Explanation:Economic exposure refers to the extent to which the value of a firm would be affected by unanticipated changes in exchange rates. It measures the potential impact of exchange rate fluctuations on a company's overall financial position. This exposure can arise from a variety of sources, such as the firm's net asset position, cash flows, or balance sheet denominated in foreign currencies.
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Indicate whether the following events might cause stocks in general to change price, and whether they might cause Big Widget Corp.'s stock to change price:
a. The government announces that inflation unexpectedly jumped by 2 percent last month.
b. Big Widget's quarterly earnings report, just issued, generally fell in line with analysts' expectations.
c. The government reports that economic growth last year was at 3 percent, which generally agreed with most economists' forecasts.
d. The directors of Big Widget die in a plane crash.
e.Congress approves changes to the tax code that will increase the top marginal corporate tax rate. The legislation had been debated for the previous six months.
Answer:
Check the explanation below
Explanation:
Inflation is systematic (Market) risk, it impacts all stocks
Results of company is unsystematic (Specific) risk, as they are as expected stock price wont have much impact
Economic growth is systematic (Market) risk, as it is inline with forecasts stock prices will be constant
Directors death is unsystematic (Specific) risk, stock price will go down
Taxation is systematic (Market) risk, as it is discussed from 6 month, stock price wont have much impact currently
Certain events affect stock prices differently. Unexpected inflation may lead to a general stock price decrease due to cost concerns. Known or anticipated events, like a consistent earnings report or expected economic growth, may not significantly move stock prices, while unexpected tragic company-specific events can cause severe drops in a company's stock price.
Determinants of stock prices can be greatly influenced by macroeconomic indicators, company-specific events, and changes in government policy. Here's how the events listed might affect stock prices in general and Big Widget Corp. specifically:
Inflation Increase: If the government announces that inflation unexpectedly jumped by 2 percent last month, it may cause stocks in general to decrease in price due to increased cost of goods and possible interest rate hikes. Big Widget Corp.'s stock might also decline if higher inflation means higher costs for the company.Quarterly Earnings Report: Big Widget's earnings report coming in line with expectations likely wouldn't result in a significant change in stock price, as the market has already priced in this news.Economic Growth Report: The report of economic growth at 3 percent, in line with forecasts, would likely not have a significant effect on stock prices, as this indicates a continuation of already-expected conditions.Directors' Tragic Accident: The sudden loss of Big Widget Corp.'s directors could lead to uncertainty about the company's future direction, potentially causing a significant drop in its stock price.Corporate Tax Rate Increase: The approval of higher top marginal corporate tax rates, that had been debated for months, could cause stocks in general to decline as corporate profits might be impacted. However, if the market anticipated this change, much of the impact may already have been factored into stock prices, including that of Big Widget Corp.
This variation in potential stock price changes reflects the market's response to new, unexpected information versus anticipated events.
Census Bureau data shows that the mean household income in the area served by a shopping mall is $72,500 per year. A market research firm questions shoppers at the mall to find out whether the mean household income of mall shoppers is higher than that of the general population.
Answer:
The null hypothesis states that the population mean is equal to a certain value
H°:U = $72,500
The alternative hypothesis states that the null hypothesis is false (according to the claim):
Ha:U >$72,500
Result:
H°U= $72,500
Ha:U >$72,500
Suppose you purchased 500 shares of Jet-Electro Corporation stock at a price of $22.50 per share. One year later, the shares are selling for $21 each. In addition, a dividend of $1.50 per share was paid at the end of the period. What is the percentage return on the investment?A) -7.1 percentB) -6.7 percentC) 0.0 percentD) 6.7 percentE) 7.1 percent
Answer:
C) 0.0 percent
Explanation:
The net return on any investment is what we receive from the investment in addition to the purchase price paid.
In the given instance the investor pays $22.50 per share as an investment cost, to acquire such shares. Number of shares purchased = 500
Now at the end of the period the shares are sold for $21 each
Also the dividend per share received is $1.50
Thus, total return = $21 + $1.50 = $22.50 per share.
This is exact same as that of the investment price.
Thus net return = Total benefits - Cost = $22.50 - $22.50 = $0
Since net return is $0 the value of return in percentage shall also be $0.
The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.6 percent?
Final answer:
The current price of the First Bank of Flagstaff's perpetual preferred stock, with quarterly dividends of $1.65 and a required return of 11.6%, is calculated using the formula for perpetual cash flows and is $56.90.
Explanation:
The current price of the perpetual preferred stock issued by the First Bank of Flagstaff, which pays a quarterly dividend of $1.65 and has a $100 par value, can be estimated using the present discounted value (PDV).
The required rate of return is an annual rate of 11.6%, but since dividends are paid quarterly, we need to divide this by 4 to get the quarterly rate, which is 2.9%. The price of the stock is the present value of the perpetual stream of quarterly dividends, calculated as the dividend amount divided by the quarterly rate of return.
To find the current price of the stock:
Price = Dividend per quarter / Quarterly rate of return
Price = $1.65 / (0.116/4) = $1.65 / 0.029 = $56.90
This formula represents the price of a stock based on its expected future dividends and the required rate of return.
ignal mistakenly produced 1,175 defective cell phones. The phones cost $67 each to produce. A salvage company will buy the defective phones as they are for $33 each. It would cost Signal $90 per phone to rework the phones. If the phones are reworked, Signal could sell them for $134 each. Signal has excess capacity. Should Signal scrap or rework the phones
Answer:
Company shall rework on the cell phones.
Explanation:
In the given case we will do the comparison of the rework with the scrap.
In case of rework:
Total cost = $67 of manufacturing + $90 of rework = $157 each unit
Selling price then would be = $134 each
Loss on per unit = $157 - $134 = $23 on each cell phone.
In case no rework is done and the mobile phones are sold in scrap then the cost associated = $67 each
Value for sale = $33 each
Loss per unit on such sale = $67 - $33 = $34 each unit.
Since there is plenty of idle capacity the company in order to decrease the loss from selling these defective cell phones, the company shall rework on the phones, as loss in this case will be $34 - $23 = $11 per cell phone less than the loss in case of scrap sale.
Wriston Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $16,000. Budgeted cash disbursements are $79,500, while budgeted cash receipts are $85,600. Wriston Company wants to have an ending cash balance of $15,000. The excess (deficiency) of cash available over disbursements for the month would be _________?
Answer:
The excess (deficiency) of cash available over disbursements for the month would be $22.100
Explanation:
To calculate the excess cash, consider the following formula:
Excess cash = Beginning cash balance + budgeted cash receipts - budgeted cash receipts.
Excess cash = 16.000 + 85.600 - 79.500 = $22.100
The treasurer of Riley Coal Co. is asked to compute the cost of fixed income securities for her corporation. Even before making the calculations, she assumes the aftertax cost of debt is at least 4 percent less than that for preferred stock. Debt can be issued at a yield of 12.0 percent, and the corporate tax rate is 25 percent. Preferred stock will be priced at $62 and pay a dividend of $7.40. The flotation cost on the preferred stock is $7.
a) Compute the aftertax cost of debt. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Answer: the after-tax cost of debt = kd(1=T)
= 12(1-0.25)
= 12(0.75)
= 9%
The after-tax cost of debt is 9%
Explanation: The after-tax cost of debt equals cost of debt multiplied by 1-corporate tax rate. The cost of preferred stock is 13.45% ie kp = D/Po-Fc= 7.40/62-7. The after-tax cost of debt is at least 4% less than the cost of preferred stocks. The variables are defined as follows:
kd = Cost of debt
kp = Cost of preferred stocks
Po = Market value of preferred stocks
T = Corporate tax rate
Fc = Flotation cost
Final answer:
The aftertax cost of debt for Riley Coal Co. is calculated by adjusting the yield of the debt (12%) for the corporate tax rate (25%), which results in an aftertax cost of debt of 9.0%.
Explanation:
To compute the aftertax cost of debt for Riley Coal Co., we take the yield at which the debt can be issued (12%) and adjust it for the corporate tax rate (25%).
The formula to calculate the aftertax cost of debt is:
Aftertax cost of debt = Yield * (1 - Tax Rate)
So, the calculation would be:
Aftertax cost of debt = 12.0% * (1 - 0.25)
Aftertax cost of debt = 12.0% * 0.75
Aftertax cost of debt = 9.0%
Blue Company reports the following costs and expenses in May.
Factory utilities $17,000
Direct labor $72,000
Depreciation on factory equipment 13,950
Sales salaries 47,500
Depreciation on delivery trucks 4,700
Property taxes on factory building 2,600
Indirect factory labor 49,900
Repairs to office equipment 1,900
Indirect materials 82,600
Factory repairs 2,350
Direct materials used 141,700
Advertising 15,500
Factory manager’s salary 8,300
Office supplies used 2,790
Required :
Determine the total amount of:
(a) Manufacturing overhead
(b) Product costs
(c) Period costs
Answer:
(a) Manufacturing overhead = $176,700
(b) Product costs = $390,400
(c) Period costs = $72,390
Explanation:
a. The computation of the manufacturing overhead is shown below:
= Factory utilities + Depreciation on factory equipment + Property taxes on factory building + Indirect factory labor + Indirect materials + Factory repairs+ Factory manager salary
= $17,000 + $13,950 + $2,600 + $49,900 + $82,600 + $2,350 + $8,300
= $176,700
b. The computation of the product cost is shown below:
= Direct materials used + Direct labor + manufacturing overhead
= $141,700 + $72,000+ $176,700
= $390,400
c. The computation of the period cost is shown below:
= Sales salaries + Depreciation on delivery trucks + Repairs to office equipment + Advertising + Office supplies used
= $47,500 + $4,700 + $1,900 + $15,500 + $2,790
= $72,390
The manufacturing overhead is $86,450, the product costs amount to $299,750, and the period costs are $75,390.
Explanation:(a) To calculate the manufacturing overhead, we need to add up all the costs and expenses that are indirectly related to the manufacturing process. These would include factory utilities, indirect factory labor, depreciation on factory equipment, property taxes on factory building, and factory repairs. Adding up these costs will give us the total manufacturing overhead which in this case is $86,450.
(b) Product costs consist of the direct materials used, direct labor, and manufacturing overhead. So, to find the product costs, we can add up these three costs which gives us a total of $299,750.
(c) Period costs include all the costs that are not directly related to the manufacturing of products. These would include sales salaries, repairs to office equipment, advertising, factory manager's salary, and office supplies used. Adding up these costs will give us the total period costs which in this case is $75,390.
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On January 1, 2018, Nana Company paid $100,000 for 6,900 shares of Papa Company common stock. The ownership in Papa Company is 10%. Nana Company does not have significant influence over Papa Company. Papa reported net income of $64,000 for the year ended December 31, 2018. The fair value of the Papa stock on that date was $65 per share. What amount will be reported in the balance sheet of Nana Company for the investment in Papa at December 31, 2018?
a. $373,500.
b. $388,500.
c. $403,500.
d. $448,500.
Answer:
d. $448,500
Explanation:
Nana Company paid $100,000 for 6,900 shares
= $100,000/6,900
=$14.49 per share
Nana Company Balance sheet as at December 31, 2018
investment in Papa Company
= 6,900 shares * $65
= $448,500
Which of the following statements is true concerning stock splits?
(A) The total number of shares outstanding does not change after the stock split.
(B) Each shareholder will own the same total par amount of stock before and after the split.
(C) Stock splits require journal entries to be recorded.
Answer: Option B
Explanation: In simple words, stock splits refers to the method under which a company issue additional shares to its existing stakeholders as per the basis of their current holdings.
Stock splits are usually done by management for decreasing the stock price when they feel it is overvalued. However stock splits do not result in any kind of other gains they are still very popular in modern business world.
Stock splits result in increase in share holding in number of shares for the shareholders but thee also comes a proportionate increase in the individual share price leading to same amount of shareholding by the holders.
Final answer:
The true statement about stock splits is that each shareholder owns the same total par amount of stock before and after the split. The number of shares owned increases, but the total value of one's investment remains constant, and no journal entries are required for the stock split.
Explanation:
The subject of this question is Business, and the grade level is College. The student asks which statement is true concerning stock splits. The correct answer is (B) Each shareholder will own the same total par amount of stock before and after the split. To explain further:
During a stock split, a company divides its existing shares into multiple ones to increase the number of shares available for trading. This process increases the number of shares owned by each shareholder proportionately but does not change the overall value of one's investment.As for the par value of shares, after a split, the par value per share decreases in such a way that the total par value for the number of shares owned remains the same.Journal entries are typically not required for the stock split itself, as it does not directly impact the financial position or performance of a company.New Gadgets is growing at a very fast pace. As a result, the company expects to pay annual dividends of $0.55, 0.80, and $1.10 per share over the next three years, respectively. After that, the dividend is projected to increase by 5 percent annually. The last annual dividend the firm paid was $0.40 a share. What is the current value of this stock if the required return is 16 percent?
Answer:
= $8.50
Explanation:
First, calculate the dividend per year;
D1 = 0.55
D2= 0.80
D3= 1.10
D4= D3(1+g); 1.10(1.05)= 1.155
Next, find the PV of each dividend given a rate of 18%
PV (D1) =0.55 / (1.16) = 0.4741
PV (D2) = 0.80 / (1.16^2) = 0.5945
PV (D3) = 1.10 / (1.16^3) = 0.7047
PV(D4 onwards) = [tex]\frac{\frac{1.155}{0.16-0.05} }{1.16^{3} }[/tex] = 6.7269
Next, sum up the PVs to calculate the price;
=0.4741 + 0.5945 + 0.7047 + 6.7269
= 8.50
Therefore, the current value of this stock is $8.50
Rogers Sports sells volleyball kits that it purchases from a sports equipment distributor. The following static budget based on sales of 2,000 kits was prepared for the year. Fixed operating expenses account for 80% of total operating expenses at this level of sales.
Sales Revenue $100,000
Cost of goods sold (all variable) 60,000
Gross margin 40,000
Operating expenses 35,000
Operating income $5,000
Prepare a flexible budget based on sales of 1,400, 2,500, and 3,500 units
Answer:
Please see attachment .
Explanation:
Please see attachment .